S. Korean firms buy back shares to boost stock prices
SEOUL, May 31 (Yonhap) — South Korean companies are scrambling to repurchase their own stock in an effort to bolster share prices amid a bearish run of the local bourse, market sources said Tuesday.
The South Korean stock market has been in the doldrums this year due to a series of negative external factors, including the prolonged war between Russia and Ukraine, and the U.S. Fed’s aggressive monetary tightening to rein in soaring inflation.
After a board meeting Friday, LG Corp., the holding company of No. 4 conglomerate LG Group, said in a regulatory filing that it will buy back shares worth 500 billion won (US$404 million) by the end of 2024.
LG also announced plans to improve its dividend policy in a bid to return more excess cash to shareholders.
Market analysts hailed LG’s stock buyback, saying it is a positive move.
“LG has yet to unveil whether it will retire repurchased shares or not, but it is very positive that the company has made it clear it will not resell them in the short term or exchange them for a stake in other subsidiaries,” eBEST Investment & Securities analyst Lee Seung-woong said.
Local pharmaceutical and other firms have also joined the trend as sharp drops in stock prices make repurchases more attractive. A stock buyback makes the number of a company’s outstanding shares decrease, raising the stock’s value.
About a fortnight ago, Pharmaceutical titan Celltrion Inc. said it will buy back 500,000 shares worth some 71.25 billion won by mid-August in an effort to stabilize stock prices and boost shareholder value.
It marks Celltrion’s third stock repurchase program this year. The drugmaker has decided to repurchase some 1.56 million shares worth 250 billion won this year.
In an emergency meeting on April 27, dental implant maker Osstem Implant Co. decided to buy back 30 billion won worth of shares after the local bourse operator allowed the resumption of its stock on the country’s secondary bourse.
Trading in shares in the country’s top dental implant maker had been suspended since Jan. 3 following a large-scale embezzlement scandal involving one of its employees.
In addition, some executives of large companies and financial institutions are rushing to purchase shares in a bid to lend power to corporate efforts to bolster stock prices and show their will for responsible management.
According to data from the Financial Supervisory Service, 28 executives of top-cap Samsung Electronics Co. have purchased some 630 million company shares worth 4.25 billion won this month.
DGB Daegu Bank, based in the southeastern city of Daegu, said in a statement on May 20 that its CEO Lim Sung-hoon had purchased 6,500 common shares in DGB Financial Group Co., the lender’s holding company, raising his shareholdings to 17,000.
In a regulatory filing on May 23, major banking group Woori Financial Group Inc. said Chairman Sohn Tae-seung has bought 5,000 company shares, with the number of shareholdings in the group rising to some 113,000.
Meanwhile, some market watchers say large conglomerates’ recent announcements of large-scale investments appear to be aimed at boosting share prices of their subsidiaries.
South Korea’s top-five family-run conglomerates — Samsung, Hyundai Motor, SK, LG and Lotte — and other major business groups have unveiled plans to invest a combined 1,084.6 trillion won over the next three to five years.